Investing in Bronzeville Condos – Analysis

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Hello to all my blog readers out there. Today I want to
take a look at investing in condos. This is an interesting
niche for investors. There is an interesting dynamic happening in some Chicago neighborhoods.

Condo prices are relatively low and rental prices are relatively high.

This creates an excellent opportunity for investors.
Today I will look at the Bronzeville neighborhood in detail.
Bronzeville is one of those neighborhoods that has great
investment potential because of this very dynamic.

I have helped investors purchase condos in this neighborhood.
I have also helped many tenants rent condos in this neighborhood. So the next logical step for my business is to provide a complete solution for investors. I will help with the purchase of a condo and provide assistance all the way through finding a qualified tenant to move in. This is a turn-key, A to Z, solution.

So today we will look at two case studies.
We will also answer an interesting question:

Which is more profitable: a 2 bedroom condo or a 3 bedroom condo?
The answer may surprise you.

CASE STUDY 1

A three bedroom two bath condo was recently purchased in Bronzeville near King Drive and Oakwood. It is 1,475 square feet. It has hardwood floors, a fireplace, and it comes with a parking space.

It was purchased for $67,000 and it was in move-in condition. The property was purchased by a cash buyer.
This is a typical purchase price for this type of
condo.

Analysis:

The median rent for an updated 3bed/2bath condo in Bronzeville
is about $1,500 per month. If your unit is in great condition
like our subject property, I can get it rented in about 30 days.
You should have low turnover because Bronzeville is in demand by renters.

At $1,500 per month, the gross scheduled income is $18,000 per year. Next, we will look at expenses so that we can figure out our Net Operating Income (NOI).

Expenses:

Taxes: $3,666
Assessments: $1,800
Water: $600
Insurance: $1,000
Vacancy: $900
Repairs: $900
Prop Mgmt: $1,440
———————–

Our expenses total $10,306.
This gives us a Net Operating Income of $7,694.
Here are our key metrics for this investment:

Net Operating Income: $7,694
Cap Rate: 11.5%
Years to Break even: 8.71
Monthly Cash Flow: $641.17
NOI/square foot: $5.22
Price per square foot: $45.42

So, we see that this is a pretty good investment. Our
capitalization rate (cap rate) is 11.5%.
For Chicago investments, most investors are looking for
cap rates between 10% and 12%. A cap rate in this range
is considered a good one. Since there is no loan involved,
your cap rate in this case will equal your return on investment.
This investment will pay for itself in just under 9 years.
You may realize additional gains if the home values appreciate
during this time period.

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Now let’s look at our 2nd case study which is a 2 bed/2 bath condo in the same neighborhood.

CASE STUDY 2

A 2bed/2bath condo was recently purchased near 48th and Vincennes.
It is a 950 square foot condo. It was purchased for $42,000.
This one was also purchased by a cash buyer.

This was rented about a month later for $1,250 per month.
The gross scheduled income is $15,000 per year. Next, we will look at expenses so that we can figure out
our Net Operating Income (NOI).

Expenses:

Taxes: $2,028
Assessments: $1,5480
Water: $400
Insurance: $1,000
Vacancy: $750
Repairs: $750
Prop Mgmt: $1,200
———————–

Our expenses total $7,676.
This gives us a Net Operating Income of $7,324.

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Side bar:

At this point in my analysis, I thought to myself
“Wow Mark! what a stunning revelation”

A two bedroom condo yielded a NOI of $7,324 which is only $370 less
than what a 3 bedroom condo yielded.
But, the purchase price was $25,000 less!
So all you Bronzeville Chicago condo investors out there, I just revealed something quite valuable. You will get a better return on your investment by purchasing two bedroom condos instead of three bedroom condos.

But, back to my analysis.
————————————————————–
Here are our key metrics for our 2bed/2bath investment condo:

Net Operating Income: $7,324
Cap Rate: 17.4%
Years to Break even: 5.73
Monthly Cash Flow: $610.33
NOI/square foot: $7.71
Price per square foot: $44.21

Look at the yields for our 2bed/2bath investment condo.
At a cap rate of 17.4%, this is an outstanding investment.
This condo will pay for itself in less than 6 years.

CONCLUSION:

Investing in condo rentals can be very profitable.
Our 3bed/2bath purchase gave us a respectable yield of 11.5%.
Our 2bed/2bath purchase knocked it out the park with a yield of 17.4%.
Imagine if you added 5 of these condos to your portfolio.
You would have a net monthly cash flow of about $3,000
(assuming you paid cash). Not bad at all!

Remember, I can offer you a turn key solution, from purchase to rental to positive cash flow!

Until the next time,

Mark Killion
Real Estate Broker
Century 21 Affiliated
5200 S. Harper Ave
Chicago, IL 60615
24 Hour Voice Mail: 312-242-1822
Send me a note!

Visit me online: www.773property.com

About Mark Killion

My name is Mark Killion. I am a licensed Real Estate broker in Chicago. I work with Kale Realty. I specialize in rentals and investment properties. I am here to serve you! Send me a note! Visit me online: www.773property.com
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